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TMI Blog2014 (2) TMI 600X X X X Extracts X X X X X X X X Extracts X X X X ..... oner of Income Tax [2013 (10) TMI 549 - ITAT MUMBAI] followed – the amount did not qualify for exemption under section 10B as these are not held to be the receipts derived from the industrial undertaking – Decided against Assessee. Unclaimed Salary Forfeited – Held that:- The receipts on this account are in the nature of the receipts credited in ‘staff agreement deposited forfeited’ as well as ‘notice period salary received from staff’ – assessee could not bring as to why these receipts should not be disallowed, especially when the receipts of this nature have already been disallowed in the earlier years - the disallowance under this head is upheld. Treatment of capital receipt as revenue receipt – Reduction in claim of mining lease expenses - Treating business Income as ‘Income from house property – Disallowance of interest paid on income tax – Disallowance of Interest paid to SSI units on delayed payments –Disallowance of provision in respect of difference of electricity duty on colony consumption payable to CSEB and provison for reimbursement to consignment agent on account of entry tax - Held that:- The decision in Century Textiles & Industries Ltd. Versus Asstt. Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s - They are recovered by the assessee on behalf of the Government - if they are made relatable to exports, the formula under section 80HHC would become unworkable – Decided against Revenue. Claim for DEPB incentive as per section 80HHC of the Act – Held that:- Relying upon Topman Exports Vs. CIT [2012 (2) TMI 100 - SUPREME COURT OF INDIA] - DEPB is chargeable to income tax under the head ‘Profits and Gains of Business or Profession’ even before it is transferred by the taxpayer - Under Section 28(iiid) of the Act, any profit on transfer of DEPB is chargeable to income tax under the head ‘Profits and Gains of Business or Profession’ as an item separate from cash assistance under Section 28(iiib) of the Act - The face value of the DEPB will fall under Section 28(iiib) of the Act, the difference between the sale value and the face value of the DEPB will fall under Section 28(iiid) of the Act - The cost of acquiring DEPB is not nil because the person acquires it by paying customs duty on the import content of the export product and the DEPB which accrues to a person against exports has a cost element in it – thus, the AO is directed to compute the income of the assessee. Deletio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 406 4. Recovery against damaged property 600 5. Notice period salary received from staff 21,762 6. Sundry balance written off 7,445 7. Unclaimed salary forfeited 2,729 8. Octroi refund 2,025 9. Other income 200 TOTAL 10,12,347 2. The appellant prays that it be held that the above receipts are qualified for deduction under Section 10B of the Act. 3. Without prejudice to above, if at all the action of the CIT(A) is confirmed, then, in that case, only the net receipt be excluded for the purpose of computing deduction u/s 10B of the Act 2. The assessee is aggrieved against the confirmation of the disallowances made by the A.O. relating to the income/receipts as detailed above which are dealt herewith separately. 1. Sale of hoops and wrappers (Rs.8,08,590): The ld. CIT(A) while confirming the disallowance relating to sale of hoops and wrappers has observed as under: 2.5 I find that CIT(A)-VI, Mumbai, has already considered this issue in his order No.CIT9A)-VI/DCIT 6(2)/1/06-07 dated 8.9.2006 for A.Y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urchased during the course of production. So the sales on Hoops Wrappers fall in the same category as that of sales of Store Bardana. There is no difference between the two as both the said materials are in the shape of packing materials and the income from packing material credited under the head Store Bardana Sales has already been allowed in the earlier years. We agree with the contentions raised by the ld. A.R. to the extent that Hoops Wrappers are the packing materials like other Store Bardana. The income from the sale of the said packing material has consistently been allowed to the assessee in the earlier years. The ld. D.R. before us could not bring any point to the effect that sales from Hoops Wrappers is different from the sales of Store Bardana Sales. Accordingly the income derived from the sale of Hoops Wrappers Sales is hereby directed to be allowed. 2. Discount/Bonus on Store Items (Rs.1,55,590/-) The ld. CIT(A) has disallowed the receipts under the above said head observing as under: 2.6 As regards miscellaneous receipts, it may be noted that Discount/Bonus on store items purchased from suppliers has no connection with industrial underta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his Tribunal given in ITA No.5935/Mum/06 for the assessment year 2003-04 observed as under: 4.4 Item No.iii. Staff Agreement Deposit is covered gainst assessee in earlier years. We find that this issue has been decided against assessee in ITA No.3890 and 3507/Mum/2005 dated 13th July, 2009 in assessment year 1999- 2000 in para 20 and in ITA No.3906/Mum/2005 for assessment year 2001-02 vide Para 14. We do not intend to disturb the accepted position. Hence we hold that this amount did not qualify for exemption under section 10B as these are not held to be the receipts derived from the industrial undertaking 5. Respectfully following the consistent findings given by the Tribunal in the own case of the assessee for earlier years on this issue, this issue is decided against the assessee. 4. Recovery Against Damaged Property (Rs.600/-) The ld. A.R. has not pressed this issue before us. Hence the same is decided against the assessee. 5. Notice Period Salary Received From Staff (Rs.21,762/-) This issue has also not been pressed by the ld. A.R. before us. Hence the same is decided against the assessee. 6. Sundry Balance Written off (Rs.7,445/-) The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw, the CIT(A) erred in confirming the action of the AO of treating capital receipt of Rs.60,552/-, being security deposit forfeited, as revenue receipt as against capital receipt treated by the appellant. However since deduction has not been made by the appellant, there would not be any effect on the total income. 2. Appellant prays that it be held that the above receipt be treated as capital in nature. 7. The ld. A.R. has been fair enough to admit that this ground is squarely covered against the assessee in the own case of the assessee vide order of the Tribunal passed in ITA No.5935/Mum/06 for the assessment year 2003-04. The relevant finding of the Tribunal is reproduced as under: 5. Ground No.2 pertains to the issue of treating the forfeiture of security deposit collected from employees and assessee treating the same as capital in receipts. 5.1 At the time of hearing the learned counsel at the outset fairly admitted that this issue is covered against assessee by the order of this Tribunal in assessee s own case in ITA No.3926/Mum/2005 for assessment year 2001-02 vide order dated 16.05.12 and also by ITA No.6365/Mum/2005 for assessment year 2002-03 dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecisions of Hon ble Supreme Court in the case of Prakash Cotton Mills Pvt. Ltd. Vs. CIT (201 ITR 684) (SC) and Standard Batteries Ltd. Vs. CIT (211 ITR 444) (SC). 70. On the other hand, the ld. D.R. relied on the order of CIT(A). 71. After considering the rival submissions, we find that the Hon ble Supreme Court in the cases of Prakash Cottom Mills Pvt. Ltd. (supra) and Standard Batteries Ltd. Vs. CIT (supra) has observed that whatever is paid to the Govt. authorities, though known as penalty, but if the same is of compensatory nature, then the same, strictly speaking, is not penalty and has to be allowed as business expenditure. The Hon ble Court has given the ample of penalty paid for delayed payment of Sales-tax which was held to be compensatory nature. Since no details have been given for the amount paid, which has been disallowed by the AO, and even the Sr. counsel of the assessee has not placed any details before us, therefore, we set aside the order of ld. CIT(A) and remit the matter back to the file of AO for re-examination of the issue and if various penalties paid are found to be only compensatory innature in view of the decisions of the Hon ble Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 170/Mum/2005 in assessment year 2000-01, for reexamination of the issue in the light of the Special Bench decision of the Tribunal in the case of Mukund Ltd. Reported in 106 ITD 231 (Mum SB) for finding the nature of the premium part. Respectfully following the order, we set aside the order of CIT(A) and restore the issue to the file of the AO for passing fresh order on the impugned issue after proper opportunity to the assessee. Ground No.6 is allowed for statistical purposes. 7.2 Accordingly, in this year also, this issue is set aside to the file of the Assessing Officer to be decided in view of the direction given above. Accordingly, this ground is treated as allowed for statistical purposes. 12. Since in the earlier years, the issue has already been restored back to the file of the A.O., so it will be just and proper for this year also to direct the A.O. to decide the same as per the directions given by the co-ordinate bench of this Tribunal for the earlier years relating to the same issue. Hence, this issue is restored back to the file of the A.O. with a direction to decide the same in terms of the order dated 12.06.13 of the co-ordinate bench of this Tribunal as repr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operty income as against business income treated by the appellant. 2. The CIT(A) further erred in confirming the action of the AO in not allowiong expenses and depreciation amounting to Rs.13,36,979/- (Rs.12,83,805/- + Rs.53,174/-) in respect of the business asset. 3. The appellant prays that it be held that the income from exploitation of commercial property be treated as business income and related expenditure and depreciation on the same be allowed. 4. Without prejudice to above, if at all the action of the CIT(A) is confirmed, then, in that case, the receipt from commercial property be treated as income from other sources and the corresponding expenditure incurred to earn above income be allowed u/s 57 of the Act. 5. Without prejudice to above, if at all the action of the CIT(A) is confirmed, then, in that case, the expenditure be allowed to the appellant in accordance with the provisions of Chapter IV-C of the Act. 15. The ld. A.R. has been fair enough to bring to our attention that the issue is covered against the assessee. This issue came into consideration before the ld. coordinate bench of this Tribunal in the own case of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s wife may be allowed, depending on the status of the parties, nature or character of the trade or venture, the purpose for which the expenses were incurred and the object sought to be achieved by incurring such expenses. In the present case, the ITAT after considering all facts on record has allowed the claim. Moreover, similar expenses allowed in the past have attained finality. In this view of the matter, in our opinion, question no.3 raised by the revenue cannot be entertained. 18. In view of the findings given by the Hon ble High Court pertaining to earlier assessment years in the own cases of the assessee, this issue is accordingly hereby decided in favour of the assessee and against the Revenue. Ground No.VIII The ground No.VIII read as under: Disallowance of interest paid on income tax Rs.4,23,587/- 1. On the facts and in the circumstances of the case and in law, the CIT(A) erred in confirming the action of AO of disallowing interest on income tax. 2. The appellant prays that the claim of the appellant be allowed. 19. This issue is also covered against the assessee vide findings of the tribunal given I the own case of the assessee in ITA N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erence of electricity duty on colony consumption payable to CSEB and provison for reimbursement to consignment agent on account of entry tax, etc.Rs.2,73,79,585/- 1. On the facts and in the circumstances of the case and in law, the CIT(A) erred in confirming the action of AO of disallowing provision made in respect of difference between electricity duty on colony consumption payable to CSEB and provision for reimbursement to consignment agent on account of entry tax, etc, on the ground that it is contingent in nature. The CIT (A) has directed the AO to allow only actual payments and when made by the appellant out of the aforesaid provision in subsequent years. 2. The appellant prays that it be held that the provision be allowed to the appellant, instead of actual payment as and when made by the appellant. 23. This issue came into consideration before the ld. co-ordinate bench of this Tribunal in the own case of the assessee in ITA No.5935/Mum/2006. While deciding the said issue the ld. co-ordinate bench of this Tribunal in the above said appeal observed as under: 12. Ground No.9 pertains to the action of AO in disallowing provisions in respect of differen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. 25. This ground is consequential in nature. No finding is required on this issue at this stage. The assessee will be at liberty to put his case on this issue, if need be, before the A.O. and obiviously the A.O. will decide the same in accordance with law. Ground No.XII Ground no.XII of the appeal is reproduced as under: Deduction under Section 80HHC of the Act 1. On the facts and in the circumstances of the case and in law, the CIT(A) erred in not considering the claim for deduction u/s.80HHC of the Act on the ground that as per normal computation of income the appellant has no profit. 2. The appellant prays that it be held that the lower authority/ies be directed to consider the claim u/s. 80HHC of the Act. If the computation under the head Business Income turns out to be positive after giving effect to orders of appellate authorities. 26. This issue is covered in favour of the assessee in its own case for the assessment year 2003-04 with the findings of the Tribunal given in ITA No.5935/Mum/2006 vide paras 14 to 14.1 which are reproduced as under: 14. Ground No.11 pertains to disallowing the deduction under section 80HHC on the alleged reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccepted by the Assessing Officer (See: page No.24 of the paper book), if so, then excise duty and sales tax also cannot form part of the "total turnover" under section 80HHC(3), otherwise the formula becomes unworkable. In our view, sales tax and excise duty also do not have any element of "turnover" which is the position even in the case of rent, commission, interest etc., It is important to bear in mind that excise duty and sales tax are indirect taxes. They are recovered by the assessee on behalf of the Government. Therefore, if they are made relatable to exports, the formula under section 80HHC would become unworkable. The view which we have taken is in the light of the amendments made to section 80HHC from time to time." 30. Since the issue before us is squarely covered by the above noted decisions, hence respectfully following decision of Hon'ble Apex Court and of co-ordinate Bench in ITA No.1450/Ahd/2006 we confirm the order of the CIT (A) and accordingly this ground of the Revenue is dismissed. Ground no.XIII B Ground no. XIII B is reproduced as under: "1. On the facts and in the circumstances of the case and in law, the CIT(A) erred in not giving any finding as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw, the CIT(A) erred in confirming the action of the AO of passing order of initiating penalty proceedings u/s. 28 (iiia), (iiib) or (iiic)account of DEPB is covered u/s. 271 (1)(c) of the Act or not. 32. It is admitted fact that no penalty proceedings yet have been initiated against the assessee. Moreover, the issue relating to whether penalty imposed under a particular head is justified or not is to be decided in the penalty order itself. So this issue raised before us does not lie at this stage and the same is dismissed being prematured. Ground no.XV of the appeal is general in nature. ITA No. 1454/Mum/08 The Revenue has raised the following ground No.1 in its grounds of appeal. 1. On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the addition of Rs.13,70,98,459/- made by the AO in respect of arrears of depreciation for the purpose of computing book profit u/s. 115JB of the Income Tax Act even though the Hon ble ITAT in assessee s own case vide their order dated 26.04.07 in ITA No.1503/Bom/95 FOR A.Y. 1988-89 and ITA No.8153/Bom/1995 for A.Y. 1989-90 have confirmed the action of the AO in this issue. 33. It may be observ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch of the Kolkata Tribunal has held that tax on profit distributed as dividend u/s. 115-O is allowable as deduction in computation of book profits for the purpose of section 115JB of the Act and, therefore, tax on profit distributed as dividend u/s. 115-O is required to be reduced while computing the book profits u/s. 115JB of IT Act. The relevant findings are reproduced as under: 34. We have given our careful consideration to the rival submissions made before us and have perused the orders of tax authorities. We have also considered the paper book filed by the learned Counsel for the assessee, written submissions by the learned DR and the Circular No. 8 dated 29-8-2005 issued by the Central Board of Direct Taxes. The revenue in this case has objected to the claim of the assessee that tax on dividend distributed under Section 115-O should be deducted from the net profit for determining book profit under Section 115JB. It has been contended by the learned D.R. that tax on distributed profit could not be treated at par with fringe benefit tax and, therefore, the action of learned Commissioner (Appeals) in directing the assessing officer to allow such claim is not correct. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 115JB of the Act while dealing in question No. 103, a copy of which is also available on record, in our considered opinion, the learned Commissioner (Appeals) has rightly treated the tax on profit distributed as dividend in similar manner as fringe benefit tax and has thereafter rightly directed the assessing officer not to add back such tax on distributed profit in the computation of book profit for the purpose of Section 115JB. We, therefore, do not see any reason to interfere with such order of learned Commissioner (Appeals) and accordingly uphold his order and reject the grounds raised by the revenue. 37. In the result, the appeal filed by the revenue is dismissed. 36. Since the issue involved is squarely covered by the above decision of the Kolkata bench of the tribunal, hence respectfully following the ratio of law laid down in the above said authority, we do not find any infirmity in the finding of the CIT(A) on this issue and as such the same is upheld. Ground No.3 Ground no.3 of the Revenue s appeal is reproduced as under: 3. On the facts and in the circumstances of the case, Ld. CIT(A) erred in holding that deduction u/s. 80HHC for the purpose of comput ..... X X X X Extracts X X X X X X X X Extracts X X X X
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